• by Jay Krihak , August 21, 2006

It's been hard not to notice the dramatic upward pricing trend for broadband video while engaged in the upfront marketplace.  The CPM is almost the elephant in the room that no one talks about. As all marketers and agencies must determine, is the premium price that affords one the "privilege" of running ads before online video content really worth the added cost, or simply cost-prohibitive?  Is it the same for product integration and branded entertainment?  The answer is very gray, and different for every client, campaign and objective. 

But, hey, we have to start somewhere, so please bear with me as I talk from both sides of my media mouth.  I might even provide a suggestion for moving forward.  If nothing else, I'm convinced that broadband video remains a nascent area of online advertising, and is in desperate need of a marketplace reality check.

The "experience" defined

The online video viewing experience is mostly the same--one where an audience of one determines how, when  and what he wants to watch, regardless of a site publisher promising to offer the most engaging video experience.  The player-based experience is viewed one person at a time, and to that individual, the content is exactly what he wants to view, making it the best content at that moment.

I do acknowledge some variation in pricing for programming, searching, tagging, sharing and image quality.  These variations, and inventory availability, obviously result in a CPM range.  However, today's range is too wide, with too many inconsistencies--particularly when compared to a TV-based standard.

The case "for"

Scarcity of quality inventory, above-average demand, and higher production requirements than standard Web fare, support the need to mark up prices.  Product integration marketing fees to place brands within TV programs can run to seven figures, on top of traditional media commitments.  Broadband integration, complete with an ad schedule, can be had for much less. 

More importantly, Web video is a lean-in experience where ads cannot be skipped. This makes video online highly accountable, as impression delivery, brand and/or response results are easily measurable.  Lastly, if existing video assets are used, the production costs for ad development are minimal, delivering cost savings for marketers while extending their television creative platform seamlessly into the online channel.

The case "against"

Regardless of what you might have heard, we're a long way away from TV dollars moving into online video.  It won't happen until average CPMs are in-line with TV, as broadband is not even close to today's TV pricing.  The average CPM for broadband video is around $30 these days, with highs in the $70s--that's a hefty premium even against prime-time TV CPMs. 

Video buyers--TV or broadband--will make sure their clients' video dollars are invested in the most efficient manner possible.  Nor will the transfer happen until audiences are aggregated to some degree for video content that's not music-oriented or reality-based.  There hasn't been one broadband "hit" yet (let's say a moderately rated TV show, equaling 10-20 million viewings), except for illegal viewings of TV-aired clips and some user-created content. 

Furthermore, some of the broadband branded entertainment prices are outrageous at over seven figures, without any guarantees of program viewings or any understanding of potential audience. The "we don't really know" line is very much unwelcome in today's results-driven marketplace.  I'd rather create the content myself, post it with a modest budget on my brand's Web site, YouTube, Revver.com, and iFilm, and save my clients money in the process.  Speaking of results, video ads deliver strong results for clients.  However, those results often fall short of the ROI multiple versus standard banner ads, failing to justify the excessive premium CPM proposed.

Food for thought

We are still in a time where online video should be seen as an investment for the future.  Our investment provides us with the means to evolve our efforts, from a results-driven point of view, maximizing the return on our clients' investment both in the short and long term.  Whether video's goal is number of viewings for branded entertainment, lift in purchase consideration or cost per action, no one argues that video is a powerful tool in the toolbox.  It just has to have the right price.